More price hikes in the offing by consumer durable firms as rupee falls

Metals such as copper and steel go into the making of white goods such as refrigerators and ACs and the threat of a trade war between the US and other countries has only put pressure on metal prices

The depreciation of the rupee has come as a double whammy for consumer durable and electronic companies reeling under the impact of the recent Customs duty hike. The rupee depreciated to Rs 65.17 to a dollar on Friday, its weakest in three months, and is expected to touch Rs 66 to a dollar in the coming weeks, raising the prospect of a price hike by firms who depend on import of components for their products.

A depreciating rupee impacts imports, as firms have to pay more against the dollar, pushing them to pass this on to consumers. The Rs 600-700 billion domestic electronics and appliances market has traditionally depended on import of components owing to the lack of a local ecosystem to source parts.

Companies told Business Standard that they were contemplating a 2-3 per cent price hike in April, their second in two months. Between January and February, air conditioner makers had increased prices by 5-6 per cent owing to new energy labelling norms that had kicked in at the start of the year. Refrigerator prices, on the other hand, had increased by 3 per cent during the period due to the change in labelling norms. 

According to sources, a second price hike in April does not bode well for demand, which picks up during the summer. “The depreciating rupee is a cause for concern because imports are affected. Plus, there is also added pressure of steel prices, which have been firming up off late,” said Kamal Nandi, business head and executive vice-president, Godrej Appliances. 

Metals such as copper and steel go into the making of white goods such as refrigerators and air conditioners and the threat of a trade war between the US and other countries has only put pressure on metal prices, sector analysts said. 

International steel prices have risen in the past few months by around 7-8 per cent. Global steel prices are expected to climb further in the coming months if countries decide to slap retaliatory tariffs on US imports following US President Donald Trump’s decision to put a 25 per cent import tariff on steel.

Eric Braganza, president, Haier Appliances India, said he was monitoring the situation closely. “If the rupee remains volatile then a call will have to be taken on whether price hikes are needed,” he said. Brands such as LG, Samsung, Panasonic, and Videocon are also tracking developments closely, sources said. These firms have not announced a price rise yet, owing to the 6-8 per cent price hike taken by them in flat panel television sets last month following the Customs duty hike in the Budget. LG India Managing Director Kim Ki Wan had come down hard on the duty hike, saying it would impact demand.

Kapil Agarwal, vice-president, marketing, Whirlpool India, said, “We had taken a 3-5 per cent price hike in three phases between October 2017 and January 2018 due to rising raw material prices. We have already accounted for a rising rupee up to Rs 66 a dollar. If the rupee slides beyond that, we would have to relook pricing.